An Argentinian naval vessel has been seized in an African port under orders from an American hedge fund seeking payment of debts that are 10 years overdue.
A three-masted sailing ship owned by the Argentinian government for training naval cadets was arrested in the Ghanaian port of Tema on Wednesday last week at the request of NML Capital a Cyprus-based subsidiary of Elliott Capital Management (ECM) of New York.
The firm is seeking to collect on bonds which Buenos Aires defaulted on in 2002.
A Ghanaian court ordered the seizure of the 100-metre Libertadon October 3.
The origin of the dispute dates back to Argentina's major economic crisis at the start of the last decade, which sparked a series of sovereign defaults. Between 2005 and 2010, more than 90 per cent of Argentina's US$100 billion (Dh367.3bn) worth of defaulted bonds have been formally restructured, with holders receiving 30 cents on the dollar. But a number of holdout creditors have sued for full recovery of assets.
These creditors have usually targeted foreign bank accounts held by state-run companies or government agencies.
ECM, run by the US billionaire Paul Singer, is one of the holdouts. ECM closely monitored the course of the Libertad, waiting for the ship to stop in a port where it would have a chance to enforce previous legal judgements by British and US courts against the Argentinian government, totalling $1.6bn.
The Libertad has been valued between $10 million and $15m.
Argentina, which has resisted holdout demands, has accused ECM and the Ghanaian courts of "violating the Vienna Convention on diplomatic immunity", and described the court's seizure of the Libertad as a "trick [by] unscrupulous financiers" .
"Vulture funds have crossed a new limit in their attacks on the Argentine republic," said Argentina's foreign ministry. "It is president Cristina Fernández de Kirchner's decision not to give way to the extortive international and local events which vulture funds have been conducting, and [the government] will continue to denounce them in different forums such as the G20, the UN and other multilateral organisations."
The Ghanaian courts have said that the Libertad, with 200 Argentinian navy cadets on board, was free to sail if Buenos Aires posted a bond with the court, which ECM would then seek to recover.
Mr Singer has a track record of acquiring bad government debt and seeking to recover.
In the late 1990s he picked up $11.4bn worth of defaulted Peruvian bonds on the cheap, and after a legal battle, emerged $58m richer. In another case he forced the government of Congo-Brazzaville to pay $90m on debt which he bought for less than $20m.
The crew of the Libertad, meanwhile are enjoying their enforced stay.
"We have been visiting lots of tourist sites while the ship is held in the port," Luís Melicán, the ship's communications officer told a local news agency yesterday. "We have been to hotel swimming pools, and we have been going to the mall. It's not too bad for us."